While the life expectancy of the average human in many developed countries now approaches 80 years, the life expectancy of the average company is much shorter. Only 44% of companies make it to the 4 year mark, and only 31% to the seven year mark. Only a handful of the tens upon tens of thousands of companies started every year will live to see the end of their fifth decade.
Why is that? Well, while it’s hard to succeed, it’s easy to fail. Perhaps the product isn’t appealing to enough prospects. Maybe the marketing team isn’t reaching the right audience, or the sales team isn’t conveying the right message. The price could be too high. There might be a sudden cash flow crisis due to an unforeseen dip in sales. The entrepreneurs could be poor managers. The investors or owners may become too greedy, and stifle innovation. And so on.
Even if a company survives long enough to bring a product to market and reach a point where it is cash flow positive, its chances of survival increase only marginally. In order to stay in business, it has to keep selling. That means it needs to offer a product that the market wants. That means, especially in some markets, that it has to keep coming up with new products and services. It has to keep innovating, and keep discovering. While some companies can do this, many can’t. Like Rick Astley, they are effectively a one-hit wonder, and if you buy their product you’ve been rickrolled.
One of the ideas I’ve been tossing around is how best to identify when a company reaches the point where it stops being an innovator and starts becoming a renovator. In other words, when is it that a company essentially offers the same solution that it offered last year, only with a fresh coat of paint. For many companies, this is the beginning of the end, since if you can’t innovate you’ll die. Of course there are some companies who specialize in buying up and renovating end-of-life products, getting a few years of new revenue and maintenance out of each acquisition (until the customers finally get fed up and migrate to a different solution). But we’ll leave such bottom-feeders out of the equation.
After studying the rise and fall of a number of software companies, particularly in the e-Commerce and Supply Chain space, I think I’ve found an indicator of the turning point. I think it’s when a company insists that you sign an NDA before it shows you a product that has been released into production. Why? Well, let’s think about it. What is the logic behind requiring an NDA before doing a demo? Obviously there are many people using the application, and it wouldn’t be terribly difficult to look over a shoulder or two if one really wanted to. So there are no secrets to protect, because the application is out there working, and presumably it’s being sold to anyone with a check book.
Maybe in order to show the application, the company has to show “real” data from a “real” customer. Well, yikes. I don’t want to see those data, and they shouldn’t be showing them to me. If a company can’t figure out how to sanitize a data set for demo purposes, it probably can’t write decent software either.
So what is being protected? Well, if I were running a company that was simply slapping a new coat of paint on an old offering every year, I’d be pretty nervous about showing it to the media — unless I locked them up with an NDA. That way, if they discover that I’m pawning off the same old s**t as last year and the year before, they can’t say anything about it, because they’re bound and gagged. On the other hand, if I were running a company with an offering that had substantial new features every year, I’d be eager to show it to the media. Good press is worth its weight in gold.
So, from now on when I hear “you need to sign an NDA,” I’m going to think “No Discovery Anymore”. I can only conclude that the fire of innovation is gone from your company, reduced to embers which are about to go cold and dark. And I’m going to look elsewhere for inspiration, because there’s no point in writing post-mortems. Just like pointless dumb conversations, that doesn’t help buyers with their needs.